Analyzing sources of growth and the burden of government bureaucracies.

1. Growth Amidst Bureaucracies:
Review of Philippines and Some Asian
Economic Performance
Bienvenido “Nonoy” Oplas Jr.
Presentation at the Rotary Club of Manila Bay
Astoria Plaza, Ortigas, Mandaluyong City
31 January 2012

2. Outline
I. Economic Growth
II. Bureaucracies
III. Conclusions

3. Vs. 3rdQ 2012 other Asian GDP Growth Rates:
China 7.7%, Indonesia 6.2%,
Malaysia 5.2%, Vietnam 4.7%,
Thailand 3%, Singapore 0.3%.
I. GROWTH
Last November 30, 2012, after the 3rd Quarter 2012 GDP data was
announced by NEDA, I wrote this article in www.interaksyon.com...

4. Today, NEDA and NSCB announced a 4th Qtr
2012 GDP growth of 6.8%, so that full year
2012 growth is 6.6%.
Other Asians so far, 4Q 2012:
China 7.8%, Vietnam 5.4%, Singapore 1.1%.

5. Forecasts 1: The Economist
Source: January 25th 2013 issue
A. Growth Leaders, 2012 and 2013:
1. China, 7.7 and 8.5
2. India, 5.4 and 6.5
3. Indonesia, 6.3 and 6.4
4. Philippines, 5.5 and 6.1
5. Malaysia, 5.2 and 4.5
6. Thailand, 5.8 and 4.2
7. Pakistan, 4.2 and 3.5
8. S. Korea, 2.2 and 3.3
9. Hong Kong, 1.7 and 2.9
10. Singapore, 1.2 and 2.9
B. Contraction:
1. Netherlands, -0.9 and -0.4
2. Italy, -2.2 and -0.9
3. Spain, -1.5 and -1.7
4. Portugal, -3.0 and -2.8
5. Greece, -6.8 and -5.0

6. Forecasts 2: Asian Devt. Bank
Source: ADB, Asian
Development Outlook,
Supplement December 2012
• On average, developing Asia
led by China and India will
maintain a fast growth of 6-7%
growth this year.
• US, EU and Japan will maintain
their anemic growth.
• EU balancing between
contraction and stagnation.

7. In case you wonder how GDP is computed…
GDP = C + I + G + (X-M) Demand side
= GVA in Agriculture + Industry + Services Supply side
C = personal/household consumption (in PH, about 70% of GDP)
I = investments/ gross dom. capital formation
G = government consumption
(X-M) = exports minus imports of goods and services
• Since C comprises
70% of GDP, even if I, G
and (X-M) do not grow
but if C grows by 10%,
GDP can grow by 7%.
• Table on the right
shows C as main driver
of PH GDP growth

8. Growth of World’s Largest Economies A:
Nominal GDP Size in $ Billion, 1992 vs. 2012

9. Source: IMF, World
Economic Outlook,
October 2012
Database
Over 20 years…
• PH economy grew
4.1x while those of:
• Vietnam 14x,
• Indonesia 6.5x,
• Malaysia and
Singapore 5.2x,
• Pakistan 3.9x,
• S. Korea and
Thailand 3.4x,

10. • Big jump in ranking of Russia due not only to growth
but also in high currency appreciation.
• PH is #12 in population size worldwide, but only #45
in economic size.
• Vietnam is growing fast but still far from PH
economic size.
• Purchasing power parity (PPP) is now introduced, to
equalize valuation of output…

11. World’s Largest Economies B:
PPP Valuation of GDP Size, in $ Billion, 1992 vs. 2012

12. Source: IMF,
World Economic
Outlook,
October 2012
Database
Over 20 years by
PPP…
• PH economy
grew 3.4x while
those of:
• Vietnam 6.1x
• Sing. 5x,
• Malaysia 4.4x,
• S. Korea 3.9x,
• Indonesia &
Taiwan 3.6x,
• Pakistan 3.3x,
• Thailand 3.2x
• Hong Kong
3.1x,
• Cambodia
6.3x, Laos 5.6x

13. (Million 1990 international $) Source: Maddison and OECD
Historical Share of Global GDP for Asia and ROW
Source: Razeen Sally, “Asia in the World Economy”, EFN Asia Conf. HK, Nov. 7, 2012
Share of Global GDP per World Region
0
10
20
30
40
50
60
70
80
90
1820 1870 1913 1950 1973 1998 2001 2030
Asia
Rest of the World
• Industrial
Revolution in mid
1800s to 1980s (1+
century) was golden
age for Europe and N.
America.
•1980s globalization
and political
democratization in
Asia started fast
growth.
• Welfare populism &
high debt in Europe
and N. America
slowed them since
the 1990s.

14. Historical Share of Global GDP for parts of Asia
Source: Razeen Sally, “Asia in the World Economy”, EFN Asia Conf. HK, Nov. 7, 2012
Share of Global GDP per World Region
0
5
10
15
20
25
30
35
1820 1870 1913 1950 1973 1998 2001 2030
Other Asia
Japan
China
India
(Million 1990 international $) Source: Maddison and OECD
* In the next two
decades, not so
happy Japan –
ageing (and
declining)
population, high
public debt,
* Big population
Asia to grow more.

15. II. Bureaucracies
From WB-IFC’s Doing Business 2013 Report

19. World Ranking in Ease of Doing Business (2012)
Ease of
Doing
Business
Starting
a
Business
Dealing with
Construction
Permits
Getting
Electricity
Registering
Property
Getting
Credit
Protecting
Investors
Paying
Taxes
Trading
Across
Borders
Enforcing
Contract
Resolving
Insolvency
Brunei 83 136 83 28 107 126 122 20 35 151 44
Singapore 1 4 3 5 14 8 2 4 1 12 2
Thailand 17 78 14 9 28 67 13 100 17 24 51
Indonesia 129 155 71 161 99 126 46 131 39 156 146
Malaysia 18 50 113 59 59 1 4 41 29 31 47
Philippines 136 158 102 54 117 126 133 136 51 112 163
Vietnam 98 103 67 135 47 24 166 151 68 30 142
Cambodia 138 171 149 130 110 98 79 54 120 142 149
Laos 165 89 80 138 72 166 182 123 168 110 183
Myanmar n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
China 91 151 179 115 40 67 97 122 60 16 75
India 132 166 181 98 97 40 46 147 109 182 128

20. Asia Economic Freedom, EFW 2012 ReportAsia Economic Freedom, EFW 2012 Report
0 2 4 6 8 10
Hong Kong
Singapore
New Zealand
Australia
Mauritius
Taiwan
S Korea
Cambodia
Asia Avverage
Philippines
Malaysia
Mongolia
PNG
Thailand
Sri Lanka
Vietnam
China
India
Pakistan
Myanmar
Source: The Fraser Institute.Source: The Fraser Institute.

21. III. CONCLUSIONS
1. Concentrate on sustaining high PH growth.
Before wealth can be distributed, it must be
created first. Forcible redistribution often harms
growth and entrepreneurship.
2. High unemployment and underemployment will
be slowly addressed if growth is sustained.

22. 3. Asia will be the growth anchor of the world economy in
the coming years, especially its big population
emerging markets.
4. Big population is asset. 7 of the 10 largest economies
by PPP valuation have huge population of 100 M+ up
to 1.3 B. More population means more consumers,
more workers, more entrepreneurs.
5. “Tax is the lifeblood of the nation.” – BIR, DOF
WRONG. Work and business is the lifeblood of the
nation. Tax is the lifeblood of government.

23. 6. Business environment and tax rates in US, EU
and Japan not good, many businesses and
rich individuals there have jumped ship, or
about to jump, mainly to E. Europe or Asia.
7. PH government bureaucracies, local and
national, should reduce business permits,
taxes and fees.
8. PH-based businesses, get ready for the good
times. Prepare also for contingencies.
Government is getting bigger and bigger,
taxes will rise higher and higher.

24. 9. Let’s go for a flat income tax, 15% both individuals and
corporations… in exchange for VAT hike from 12 to 15%.
Flat tax countries, in percent…
• 10%: Kyrgyzstan (2006), Kazakhstan (2007), Macedonia
(2007), Mongolia (2007), Albania (2008), Bulgaria
(2008), Serbia (2008)
• 12%: Georgia (2005), Macau, Belarus (2009)
• 13%: Russia
• 15%: Hong Kong (1947), Ukraine (2004), Iraq (2004)
Montenegro (2007), Mauritius (2007), Czech Rep. (2008)
• 16%: Romania; 18% Estonia; 19% Slovakia. Singapore?